Switzerland consumer goods

Retail sales weakened in March

May 9th 2018 | Switzerland | Retail

Event

Data from Switzerland's Federal Statistical Office revealed that nominal, seasonally adjusted and working-day-adjusted retail sales volumes fell by 1.3% year on year in March, the first year-on-year decline since October. This compares with a 2.2% increase in annual sales in March 2017. Excluding fuel sales, nominal retail sales fell by 1.5% year on year.

Analysis

The Swiss retail sector has been hit hard in recent years by the decision taken by the Swiss National Bank (SNB, the central bank) in January 2015 to remove its standing bid for euros. This led to a sharp appreciation of the Swiss franc, which pushed retail activity abroad in so-called shopping tourism. As a result, year-on-year retail sales dropped by 3.1% in 2015, 2.6% in 2016 and were broadly flat in 2017. There were signs of a stronger performance in the sector at the end of last year, when sales increased annually by 2.3% in December, which was followed by modest growth of 0.1% on average in January-February. Although a full breakdown has yet to be released, sales of non-food items are likely to have been responsible for the decline in March, as sales of food, beverages and tobacco were up by 1.1% year on year.

The franc has since depreciated dramatically, and there are reports that shopping tourism has died down, adversely affecting French retailers on the other side of the border and providing some relief for Swiss retailers. However, the decline in year-on-year sales in March indicated that the sector has yet to get on a firm footing. This may partly reflect a recent dip in domestic consumer sentiment, as measured by the State Secretariat for Economic Affairs (Seco). However, we expect this to prove temporary, as labour market conditions remain conducive to firmer growth in consumer spending, even if the household savings rate remains high.

Impact on the forecast

Despite the latest weak retail sales data, we maintain our forecast that consumer spending growth will firm in 2018, to 1.6% on average, after 1.2% in 2017.